Tort Reform

March 8, 2010 at 12:26 pm | Posted in The Knave | 4 Comments
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Tort laws address injuries suffered by a person in situations where there is no contractual relationship.  For example: Party A is a doctor and Party B comes into her office to have a boil treated.  While Party B is sitting on the examination table, Party A decides to show off a new trick she is learning involving the juggling of sticks of butter and running chainsaws.  Something goes horribly wrong and then Party B goes crying to the courts for money because he thinks a new plasma television will help him come to terms with having fewer limbs than prior to meeting Party A and by the way, the boil is still there and growing. 

The current talk about tort reform among pantywaists and milksops is a proposal to help lower medical costs in the United States of America by putting caps on medical malpractice lawsuits.  But such tort reform is just another government regulation and would do little to lower costs.  Those who are not namby-pambies and spineless gutless weaklings know that to truly lower medical costs, what is needed is less government, not more. To take this to its logical conclusion, the only true tort reform is tort elimination.

Get rid of the tort laws and allow the invisible hand of the Free Market to gently hold your sensitive areas as you turn and cough. Why are visits to the doctor so expensive? First, it is expensive to train a doctor and takes a very long time. A doctor has to know much more than is really necessary to get in, get out, and get paid in pretty much every circumstance.  Second, due to the doctor’s knowledge, she has to practice defensive medicine.  This is when a doctor performs extraordinary tests and procedures on every patient, just on the off chance that there is some medical problem other than the obvious. A less knowledgeable doctor wouldn’t know about other possibilities and could therefore save everyone a lot of money.  Third, if the doctor doesn’t perform defensive medicine, tort laws can be used to show that the doctor did not do everything possible to avoid injury to the patient and subsequent legal prosecution can lead to persecution through the awarding of damages.  Tort reform by eliminating tort law would reduce tort litigations to zero, thereby completely solving the problem of excessive judgments for damages. There would be no money wasted on defensive medicine, because the doctor could not be sued and therefore would only do the bare minimum for a patient. The doctor would not have to waste so much time being educated and interning, because there would not be any material consequences to just learning as he goes.  Two simple words provide a clear replacement for all tort laws

Buyer, beware!

The Free Market will ensure that good doctors get more patients and therefore more profit, while the bad doctors will go out of business. If a patient goes to a doctor who cuts off the wrong leg, it is probably because the patient did not do enough research before purchasing leg removal services. Why should the doctor be punished by the courts, i.e. the government, for learning one of life’s little lessons? If the patient is not satisfied, he can post a bad review online and the doctor is sure to lose patients, and therefore money and therefore will have been punished by the Free Market. To avoid this, the doctor may well try again and remove the correct leg for free.  She’s bound to get it right the second time if only by process of elimination and will likely do better next time someone wants a leg chopped off.  A doctor who cuts off the correct leg 95% of the time will get paid more than one who is only 50/50. If you go to that 50/50 doctor, because you can’t afford the better one, negotiate a contract beforehand. Contract law would still exist with the elimination of tort law, but make sure you negotiate a good deal before you let the doctor remove that bullet from your femoral artery.  If the doctor won’t agree to your terms, find one that will.  If the infection around the gunshot wound in your leg starts to smell and contract talks with a seventh doctor break down, just do the procedure yourself.  Self-amputation will stop that gangrene and save you a gang of green $$$$. 

With the Free Market in control, however, it is unlikely anyone would ever face the above situation.  There would be such an explosion in the number of doctors that they would be lining up to cut the lead out of your thigh and at amazing prices.  Without any fear of legal interference and financial ramifications, citizens would increase the supply of medical service providers by declaring themselves doctors en masse and thereby bring down the costs through competition. Strip away all of the government certification requirements (they’re unnecessary as no one can sue anyone for not having them anyway) and everyone can perform a medical procedure for a fee. Traditional fully trained doctors would still make the most money, since they would have the best services and results, but anyone who saw a YouTube video on how to remove an appendix could charge maybe $50 at a discount surgery shop. Any discount shop would do the best it could in price or quality of service or go out of business to other shops staffed by people who had seen that same video. 

The Market will regulate itself. Poor people will be motivated by their poor options to work harder or will have to settle for what they can afford. Discount medical centers for any number of specialties will spring up across the country and all of these small businesses will lead to innovation that will reshape and reform America into the nation its Founders hoped it would become. If the Surge-o-rama Appendix and Gall Bladder Removal Factory has a survival rate of 40% and its competitors are only 20% successful, it will be more profitable and maybe its employees will even be able to afford some of that fancy book learning the doctors get. The business will grow, cut costs, gain volume discounts, franchise, etc.  Maybe they’ll provide a 30% survival rate appendix removal at $19.95 with a free a gall bladder exam or a deluxe 50% survival rate extraction of any two organs of the customer’s choice.  The Surge-o-rama could diversify into making higher quality appendix removal videos they could post on YouTube to recruit higher quality neo-doctors, thereby increasing the health of the nation, while making a profit and reinvesting and innovating, etc….

This wonderful world where every man, woman, child and helper monkey can grow up to be a doctor—free from the shackles of tort law that would hold them responsible for any incompetence causing harm to their patients—simply by adding two letters before or after his, her, or its name can become reality through the tort reform of tort elimination.

(Before you ask, yes, you can add two letters to both sides of your name, Dr. Bubbles the Chimp, M.D.) – The Knave

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  1. Free markets are short term instrument.

    But the continuity of of the human experiment depends on more than just success in the short term, and efficiently allocating resources does not embrace everything people want or need to do.

    For all their power and vitality, markets are only tools. They make a good servant but a bad master. Economic fundamentalism treats living things as dead, nature as a nuisance, several billion years’ design experience as casually discardable, and the future as worthless.

    Economic efficiency is an admirable means only so long as one remembers it is not an end in itself, as many conservatives believe.

    Markets are meant to be efficient, not sufficient; aggressively competitive, not fair. Markets were never meant to achieve community or integrity, beauty or justice, sustainability or sacredness – and, by themselves, they don’t. To fullfull the wider purpose of being human, civilizations have invented politics, ethics, and religion. Only they can reveal worthy goals for the tools of the economic process.

    So how does the market allocate scarce resources efficiently over the short term? Let me provide an example. Almost all US buildings use wire sizes that conform to the National Electrical Code minimum requirement, because the wire size is selected and its cost is passed through by the low-bid electrician. The same happens when building manufacturing plants that use pipes that carry fluids. In the case of electrical wires, one or two sizes fatter would produce more return on investment in the long run because the fatter wire would reduce resistance, but the fatter wire costs more.

    In a typical office lighting circuit, the next larger wire size yields about a 193 percent-per-year after-tax return on its additional cost. There are far to many examples of this but the markets alone are not capable of optimizing the whole system. So, we can talk about the old ways of doing business or we can talk about the possibilities of moving forward, about new ways of capturing these costs.

    Let’s not forget the theory of free markets is just that theory to help us understand but reality is a real slap in the face.

    We can talk about market theory, we can talk about how all BIG government and regulation is bad or we can talk about how corrupt Wall Street is or how government created the mess we are in or how wall street greed created the mess we are in. I do not buy into either false promise. Only a fool would, only the political parties do, only the media darlings of the left and right do.

    Some market theologians promote a fashionable conceit that governments should have no responsibility for overseeing markets – for setting the basic rules by which market actors play. Those seduced by the purity of such theories forget that the austere brand of market economics taught by academic theorist is only tenuously related to how markets actually work. By the time textbook simplifications get filtered into political slogans, their relationship to actual market behavior becomes remote.

    1. All participants have perfect information about the future.
    2. There is perfect competition.
    3. Prices are absolutley accurate and up-to-date.
    4. Price signals completely refect every cost to society: There are no externalities.
    5. There is no monopoly (sole seller).
    6. There is no monopsony (sole buyer).
    7. No individual can move the market, affecting wider price platforms.
    8. No resouce is unemployed or underemployed.
    9. There’s absolutely nothing that can’t be readily bought and sold (no unmarketed assest)
    10. Any deal can be done without “fiction” (no transaction costs).
    11. All deals are instantaneous (no transacltion lags).
    12. No subsidies or other distortions exist.
    13. No barriers to market entry or exit exists.
    14. There is no regulation.
    15. There is no taxation (or if there is, it does not distort resouce allocation in any way).
    16. All investments are completely divisable and fungible – they can be traded and exchanged in sufficiently uniform and standardized chunks.
    17. At the appropriate risk-adjusted interest rate, unlimited capital is available.
    18. EVeryone is motivated solely by maximizing personal “utility”, often measured by wealth and income.

    So now lets talk about the tort system at the state level and how Republicans want to take away one of the last remaining institutions available to the common man.

  2. Let’s look at how a tort trial typically works. The injured party has a lawyer (you know, the “bad guy”). The doctor/corporation/defendant has a lawyer (or lawyers). There is a judge. And then there are twelve (sometimes six) ordinary citizens. – the jury.

    The injured party’s lawyer has a chance to tell his client’s story. The lawyer(s) for the doctor/corporation/defendant has a chance to tell his(their) client’s side of the story.

    The judge tells the jury what the rules they have to apply to the case are.

    Then the jury makes a decision.

    It is this last group of people the Republicans are really complaining about. They are the ones deciding whether to award money to the person who claims s/he was injured.

    But to hear the Republicans tell the story, you would think that there is only one lawyer in the courtroom (the injured person’s lawyer), the judge is asleep, and the injured persons’s lawyer is sitting with the jurors as they deliberate, telling them what to do.

    • Mark, the fact that their are lawyers on both sides triples the tort costs of health care because the lawyerS [it is never singular] for the doctor are hired by the insurance industry [public enemy #1] which is also footing the bill for the injured party’s medical expenses through their policy – a real conflict of interest, don’t you think?

      The fact is, jury awards are excessive [to the tune of $125 billion annually] and the direct result of defensive medical practice [to the tune of $50 billion per year]. If the congress is meddling in things that save us $3-$15 billion over a decade, surely they are interested in saving $175 billion per year.

      And why don’t they? Because 40 % of congress are lawyers and when we send them packing they get a jobs as a lawyer or as a lobbyist [fancy word for lawyer].

      Tort reform would help. A loser pays [and splits that cost with his lawyer] would make people think twice about suing just to see what they can get a plaintiff to settle for, which would all be paid by the malpractice insurance company thereby raising the doctors rates and health care costs.

  3. Knave –

    Your article was simply hilarious! I wrote one about Lawyers being Public Enemy #2 [Insurance Co #1, Banking #3]. I love lawyers! They taste like chicken.


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